Here's why it's time to look for breakouts

Samsung Semiconductors are seen on a circuit board.
Justin Sullivan | Getty Images

Time to look for breakouts.

The strong ISM number this morning was a big relief for the markets. The low print of the day was right after the open, and we struggled until 10 am ET, when the ISM number came out and the markets immediately turned around.

The Beige Book showed modest economic growth with tighter labor conditions pushing up wages—not a big change but the markets again moved up modestly nonetheless.

The next big number will be Friday's ISM Services, which is also expected to be strong...55.5 (anything above 50 indicates expansion).

The problem now is that we are in a no-man's zone, with very few leadership breakouts.

Normally, when the S&P 500 is less than two percent from a new high, you will see sector breakouts. Traders will aggressively purse some sector, volume will increase, and suddenly there will be a spate of new highs.

That's not happening, at least not yet. There are 91 new highs on the NYSE Wednesday, that is nowhere near where we should be.

There are tantalizing signs. The Semiconductor Index is at new highs for the year and just on the verge of a 52-week high. A few chip names like Texas Instruments and Microchip Technology and Nvidia are indeed at new highs Wednesday.

Still, traders are waiting for significant breakouts. That's why Friday is important. ISM services and nonfarm payrolls!